The Monetarist-Keynesian Debate and the Phillips Curve: Lessons from the Great Inflation

Since the early 1950s, debate between economists of the Cowles Commission and Milton Friedman macroeconomics has developed along two parallel but integrally interconnected tracks. The Cowles Commission track involves development of a model of the economy organized around a system of stochastic difference equations with research efforts directed toward providing microeconomic foundations for the individual equations. The Friedman track involves using changes over time in the systematic character of monetary policy and departures from a given policy as surrogates for controlled experiments in an attempt to distinguish between alternative models. The Monetarist-Keynesian debate of the 1960s and 1970s illustrates this ongoing dialectic within macroeconomics.